Posts filed under ‘Special Rants’
Student Loans and the Myth of Supply-Side Economics
The student loan conundrum leaves a generation of college goers little to no economic end game. As Congress hits an impasse on interest rates and the employment market remains stalled for college students and recent graduates, a hidden culprit may just get away with all the money plus interest. In the meantime, the today’s twenty-something kids may have children paying student loans before they finish paying off their own 20-30 year refinanced college loans. How many times must you say, “Mortgage our children’s futures” before the message sinks in?
Thirty years into the era of supply-side economics, a period during which Wall Street ironically rewarded the divestiture of the supply side of domestic industries, there was too much money and nowhere to invest. Assets were created that blew up as bubbles, erupted when undisclosed risk was realized, or inflated investments in health care and real estate. In addition, there were the banks, no longer financing business investment for future employment and domestic production. Flush with excess cash, they loaned the money to kids to finance their college dreams. Profits followed, even as stock and money markets failed to underwrite the job creation that could have helped those dreams come true.
To make matters worse, at least some of the colleges created a nudge to keep the kids in the debt cycle without their parents’ knowledge. My husband and I learned first-hand how it worked. Each year, as guardians, we received a financial aid report from the college. We had chosen not to have the kids carry more than a modest debt burden…just enough to learn how to handle personal finance responsibly. So, we generally declined the loan portion of the financial aid package each year.
Each term, however, the child’s eligibility for bank loans was kept alive by the college. We would pay what we considered our portion of the college bill each term, assuming no loan. Then the college would reactivate the loan, creating a credit balance on the student account, and send a check to refund our overpayment…to the kid! And privacy laws meant we didn’t need to know about it. How’s that for a sweet deal among a college, a bank, and a newly minted young adult with a prefrontal lobe still in development?!?
Actually, I must credit the student…who did report the transaction and forward the checks back to us. We did not fully understand what was happening at the time (the multiple-click, self-renewing opt-out), but we held ourselves accountable when the unexpected debt showed up after graduation. But I also wonder just how many children kept the cash and had to pay later…cash the banks should have used to encourage sound investments with real adults…if we had had a supply-side investment strategy as job creators. Preying on the children was just too easy.
I have written previously about the convergence of forces to create the demand for college loans, which included some adults falling short on college readiness with the children, others raising prices unnecessarily, and others underwriting at predatory rates. The supply of loans was also part of a wildly flawed scheme. We gave banks and investment advisers our life savings and they gave us excuses and a world financial collapse. No one got richer except those who were extremely wealthy already.
Now Wall Street and their Congressional spokespeople ask us for more supply-side money. We, on the other hand, are asking them to give us back a piece of our money – from the profits they made while SHRINKING THE NATION’S SUPPLY FUNCTION – in the form of merely fair taxation. If, after 30 years, they have not created a supply side in net…why should we be fooled again? At least give back enough tax money to restore what should have become our own investment earnings so we can bail ourselves out…rather than the bankers (again) when the student debt bubble bursts.
PS, wonder how our reliance on these same kids to sustain our Social Security trust fund is going to work out. That next sandwich generation is now going to be a triple-decker paying for their kids, their parents, AND their colleges…while un- or under-employed?
Want to Change STEM to STEAM? BUY ART!!!!!!!!!!!!!!
We are in the golden age of turn-of-the-21st-century art. Really. My husband and I are art lovers who spend many hours of our free time each week visiting artists in their open studios, pop-up exhibits, or openings. It can be the most exhilarating experience to find a new artist or piece of work in the unknown zone of urban guerrillas in transition neighborhoods or the warm glow of nurturing artist lofts. The downside? Seeing the un-purchased work still hanging on the wall years later as brilliant artists struggle to keep their studios and their dreams alive.
In the Renaissance, the convergence of math, physics, art, and music brought European society out of the dark. And the philosophers gave us hope and angst. So it is for educators as we realize the need to nurture the minds of our young with STEM studies even as we feed their souls with Art. Uh, is there a problem here? Yes…the artists are still going to starve.
The schools of art are doing their part. The students are expanding their horizons and developing into wonderful artists. The arts community has collaborated to create safe harbors for creation of new art, critiquing one another’s work, and displaying it whenever and wherever possible. Local politicians, cultural councils, and corporations try to support these communities. However, the missing element continues to be the buyers of art among every day citizens.*
Art collecting in the stratosphere is not the real world, yet that is where the publicity lies. In reality, local work from very talented artists is accessible geographically and financially. Some buy one work a year for a lifetime of joy around their dwellings. For others, there is a great work that is the one-time purchase and the centerpiece of their decorating. The biggest part of the market, however, remains the underground network of bartering among the artists themselves while their day jobs sustain them and their families.
Demand stimulation is the theme for our decade. Just wanted to put in my plug for the artists. Please, go to open studios and buy art. You will find something you love, and it will make you very happy.
*(Or the local museums with megabucks expansions, but that is a topic for another day…)
Maybe “Bully” Should be Seen with a Parent or Guardian
To be authentic, a movie about bullying may not be able to pass all the hurdles for the access provided by a PG rating. Meanwhile, what parent of middle or high school students isn’t looking for an opportunity to see a film with his or her child? The kids already know what is going on, so seeing it with each other may not be the point. Take your child to see the movie, and then talk about it.
The movie Bully has been rated “R“ by the Motion Picture Association, making it less accessible to the very population that it targets. However, I am not sure that changing the rating is the best solution to the problem. Perhaps part of the point could be that the language that mandates an “R” rating does not belong in school. In fact, reversal of that standard would imply that the abusiveness we wish to protest has become an accepted part of the landscape.
My husband and I looked at each other the first time one of his kids dropped the F-bomb in casual conversation. How should we respond? As Baby Boomers, we grew up in a generation that had challenged authority and the limits of the vernacular. However, peppering everyday conversations with any of George Carlin’s Very Bad Words was not intellectually defensible. Yeah, we may have earned a few language citations of our own among our friends, but controversial language needed to pass the test of approval by everyone within earshot, not just one’s inner circle.
And bad words are not just the profane ones. Any language can be turned into a weapon with intent. Again, we looked in the mirror. Sarcasm and irony are valued highly around the house. And no one was prouder than we were when the kids developed their ruthlessly dry wit. Fortunately, there was a teen improv group through which to diffuse mean jokes across a larger audience. But what are the limits?
Then there’s the notion of competitiveness. Isn’t that when an athletic event or debate makes us stronger by allowing us to totally triumph over worthy adversaries? Or some days just sort us into winners and losers? It gets complicated, especially when supporters gather. Is the home team advantage anything more than outnumbering the other guy?
Empowerment is good; arrogance is bad. But who is the judge when even genuine success can be fleeting? We constantly look for opportunities to bolster ourselves and our friends and families. Our homies need us. They are not a gang, are they?
We do not stand taller when the other guy falls down, but no one knows better than a Bostonian that the other guy’s missed field goal can get you into the Super Bowl…
Kids need help sorting it out. So do we. Read the stories, watch the movies and TV shows, and then listen. The kids may come to the right answers faster than we do.
Age Discrimination Is Not Just Illegal – It is Wrong
In America, it is illegal to discrimination against employees on the basis of race, gender, religion,… or AGE! However, the last attribute is the one I have found missing most often from explicit lists in anti-discrimination policies of public school districts. And the rhetoric in the field suggests that this omission is not accidental.
I’ve had it. The excerpt below came from a New York Magazine article about a principal in an elite public school in the Bronx, but it could have arisen just about anywhere in education…
“She devised a two-part strategy: Those new teachers who couldn’t or wouldn’t teach her way would not get tenure; the older, set-in-their-ways teachers would retire sooner or later, making room for young ones she could train herself (Reidy generally hires new, unmolded teachers, not experienced teachers who have earned tenure elsewhere). *
Not only does it espouse a pedagogical one-way street, it also embodies the age bias that has become an accepted part of the landscape.
As an industry, we have become complacent about laying the blame for problems in education on people who, upon reaching a fairly early middle age, have failed to die…or at least go away quietly. A system of tenure combined with a pension trap may engender stagnation on the job for some; however, the presumption of ineffectiveness based on a demographic attribute is prejudicial and, frankly, ignorant. Further, an incentive system that fails to facilitate frequent self-assessment, goal-setting, and review over the entire course of a career is the real culprit, to the extent that teachers are complicit in disappointing results.
Age bias hurts everyone and should offend everyone, not become a policy initiative. From a legal point of view, the statement cited above offers prima facie evidence of discrimination. In addition, it bolsters a naïve approach to leadership that ignores the combined values of diversity and authentic staff development in the vitality of any organization. Preference for young employees overlooks the value added by age and experience. It deprives younger staff of natural mentors. It eliminates institutional memory. And it has no end game for employees. Being young-at-heart has no value – one simply must not get old.
Finally, if age bias is not effectively remedied by the leadership in education, school districts will get exactly what they deserve…an age discrimination case in the courts which forever protects every charlatan who happens to be an older adult along with all those dedicated teachers of a certain age who continue to devote their lives to the education of children despite the insidious prejudice they face every day. And it should, because they all deserve equal protection under the law and the full benefits of the American constitution.
*Source: http://nymag.com/news/features/bronx-high-school-of-science-2011-12/index2.html
Colleges Need to Get Real
From education to finance, American institutions have raised avoidance of accountability to an art form. The blurring of lines among industry players has allowed them to diffuse responsibility for their basic missions. Within education, high schools and colleges are collaborating creatively in dual enrollment programs to lower failure rates. Ultimately, however, they may be conspiring to conceal inadequate college preparation by offering college-lite for an exorbitant price to students who cannot afford it. Their efforts would be better spent getting back to basics on their own turf.
College (kol-ij) n. a place where students go to finish high school and/or get ready for grad school while accumulating massive amounts of debt. Often found adjacent to prestigious institutions offering access to elite faculty who can only be seen by students pursuing advanced degrees.
There was a time when wealthy young dilettantes who needed a little more time to grow up attended exclusive prep schools that their parents could afford with ease. The goal was success in college once they were ready. Somehow, the American Dream has mutated such that financially strapped, first-generation college students are paying premium prices for four-year prep schools, followed by unemployment and massive debt problems.
Something is wrong in this picture. The first clue is the huge debt burden among young people…many of whom are also jobless. The culprit? No one in particular. Rather, it is a perfect storm of weak public schools, nouveau all-star colleges, and opportunistic financiers. Before we can solve the problem, however, we must unravel the fuzzy roles and accountabilities lost in emerging partnerships, collaborations, and joint ventures. The punch line: colleges need to better serve their undergraduates in the primary mission of higher education, high schools need to ensure that their graduates are truly ready for college, and financial institutions need to share the burden of risk or lower their interest rates.
Let’s begin with the public school system and college readiness. Ten years ago, the nation set the goal of college readiness for all students by high school graduation. Most schools have fallen behind on that goal, according to standardized tests. Nevertheless, as an alternative to testing, many high school principals naively set out to achieve 100% college application rates among graduating seniors as a proxy for readiness. Well-meaning guidance counselors facilitated broad searches for colleges and helped students complete applications; volunteers supported students through their applications for financial aid. For many low-income families, children were going off to college for the first time. Mission accomplished.
Colleges experienced higher application rates and, in many cases, higher acceptance rates among their admitted applicants. Free market economics worked, and colleges raised their tuition and fees in response to this increase in demand. Administrators were bewildered but pleased to discover that a more expensive college seemed to attract even more applicants. In addition, oversubscribed colleges were strapped for dorm space, asking students to share tight spaces for more money. In the meantime, want ads were full of opportunities for adjunct faculty members. Access to tenure-track teachers became elusive. Students found themselves paying Ivy prices for average schools at best.
Meanwhile, financial institutions expanded college lending operations and actively courted university officials for access to students for underwriting purposes. Interest rates to students rose, and risks for banks declined with government payment guarantees. All agreements were packaged by the schools, and banking relationships were ancillary.
As colleges grew in size, undergraduates found themselves with fewer safety nets. To complicate matters, many students and their families were unaware of the strings attached to financial aid. Need-based scholarships turned into high-interest loans when ill-prepared students failed to meet GPA requirements for retaining those scholarships. Already committed, students chose to sign the loan papers and stay in school. The Dream would remain within reach. Predictably, college drop-out rates soon grew, along with a new underclass of young people faced with a mountain of debt. In the highest-risk populations, college completion rates fell to the single digits.
To address this problem proactively, some very good dual enrollment programs have been developed that offer previews into college course work at little or no cost for high school students. This has become an important part of the community college mission in many localities. However, four-year colleges also have gotten into the act to grease a path to long-term commitment for students who have little chance of success. In addition, many institutions have all but forgotten their attention to excellence in undergraduate education. They offer a rite of passage that holds empty promise for students passing through them, continuing the new tradition of poor preparation for life. As college-lite has become a reality, graduate degrees have become the expectation for many professions.
We are not doing our young people any favors by dealing in false hopes. High school diplomas need to represent genuine college readiness. At the college level, $200,000 is too much, but it must at least buy a real education. And guaranteed student loans need to carry interest consistent with that guarantee.
Occupy Wall Street – Show Up for School
The Occupy Wall Street movement is a vitally important cause with many supporters as well as cling-ons. Please leave its crucial message on the US and world economies intact. The legacy of education reform is essential to our children and our economy, but we must maintain a separate identity. Please…Don’t call it Occupy the Schools.
The world is trapped in the trenches economically. We must address our woes through stimulation of the economy, investments in local production, and reversal of the toxic alchemy in financial instruments. There is nothing more vital to the survival of our political economy than substantive change in the form of long-term redistribution of wealth away from imprudent investors, the alienated ultra-rich, and our overseas creditors. Implicit in that political economy is a market economy that is responsive to money as well as the political strength of the democracy when lack of money silences too many would-be participants.
The Occupy Wall Street demonstration is functional, meaningful, and deserving of fiscal and monetary policy response. We must cautiously avoid added baggage on the coattails of the movement that might reduce the impact of its primary message.
Health Economics Rant
Healthcare costs for government employees and retirees have been bones of contention in contract negotiations across the nation. However, a perfect storm of rising costs, recession woes, and aging of the population could be offset by introducing the laws of economics to the supply side of healthcare.
The supply of healthcare products and services has been subject to relatively unrestrained inflation and economic rents for decades despite policy initiatives to contain costs. Aside from some success with government as the payer, healthcare providers have been in a position to mandate rising payments for services. They have taken advantage of their position as controllers of supply and demand for products and services, and they have wielded this power to eliminate the law of diminishing returns with increased volume. Cost containment efforts have produced shadow-pricing in products and procedures; technological innovations have become the cornerstones for institutional expansion and growth for the bureaucracy. So why isn’t there more aggressive opposition?
Through tough economic times, healthcare stocks have offered the rare growth opportunity. Healthcare providers and suppliers have increased their contributions to employment. Facilities expansions have boosted new construction. Despite the fact that healthcare has crowded out other investments in our economy, especially the factors of real production, we have come to rely on these benefits, however short-sighted, as bright spots in a dismal economy. Costly therapies have spun out of control, and we cannot afford to get well. Still, no one wants to kill the goose that lays the golden eggs.
For a visionary, there is a way out of this mess. And it comes in the form of an opportunity that many prefer to see as the challenge that is going to sink us: the aging of the population. We merely have to begin to analyze the supply side of health care with an eye to diminishing returns that lower units cost of product/service provision. The resulting drop in unit price would be offset by growth in unit demand with population redistribution toward middle age and old age. If done right, employment would be stable and healthcare stocks would not have to crash.
We are not helpless in the face of rising healthcare costs, nor are we beholden to it for what remains of our wealth. Ideally, we could contain total healthcare expenditures to a stable percent of GDP while addressing healthcare needs in the private markets. The industry might grow a bit faster than the economy initially, but there would be an incentive for orderly transfer of investment out of healthcare and into emerging growth markets.
Twenty years ago I watched in dismay as we made key bad decisions that vilified the managed care industry and gave carte blanch to provider groups. The latter consolidated their power in local markets and eliminated the crucial role of health insurers as agents of purchasing power for the consumers. Key provider groups began to walk away from price negotiations, and insurers caved lest they lose all of their customers. Today, not even the largest state employee insurance pools have the power to bid down prices in healthcare. That suggests that healthcare providers function as monopolies in their local markets – a role that baffles them all the way to the bank.
Eventually, with the aging of the population and unrestrained healthcare inflation, there will be enough pain in the industry for politics to overrule on the supply side. In the meantime, we can use enlightened management of costs within these operations to reduce the redistribution of wealth from ourselves to healthcare providers and suppliers. Alternately, we can go broke watching the gradual erosion of healthcare provision and outcomes in that coming Perfect Storm.
